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Gift Cards and Farm Source Dollars: The New FBT Rules Every Dairy Farmer Should Know
1/11/2025
Gift Cards and Farm Source Dollars: The New FBT Rules Every Dairy Farmer Should KnowChristmas bonuses, end-of-season rewards, and Farm Source Dollars—these staff incentives are part of farming life. But recent tax rule changes have left many dairy farmers confused about whether these rewards should be treated as wages (PAYE) or fringe benefits (FBT).The good news? The rules are now clearer and simpler than ever.The Gift Card Confusion: What Happened?For years, dairy farmers treated staff rewards consistently:
Then in April 2025, Inland Revenue released guidance (QWBA QB 25/07) that threw a spanner in the works. Suddenly, "open loop" cards—those that work anywhere like Prezzy or Visa gift cards—were meant to be treated as cash wages requiring:
Meanwhile, "closed loop" options like Farm Source Dollars and Mitre 10 vouchers remained FBT items.The problem? This created unnecessary complexity for what should be simple staff rewards.The Fix: Parliament Steps InRecognizing the compliance burden this placed on employers, Parliament introduced the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill.Key changes:
To bridge the gap until the law passes (expected before 31 March 2026), Inland Revenue issued Commissioner's Operational Position OP 25/02 in September 2025:
Understanding the Types of Staff RewardsOpen Loop Cards (now FBT)
Closed Loop Rewards (always FBT)
All rewards now follow the same FBT rules—no more guesswork.The De Minimis Exemption: Your Best FriendThe de minimis exemption lets you give staff rewards tax-free if you stay within these limits:Individual LimitLess than $300 per employee per quarterBusiness LimitLess than $22,500 total across all employees per yearImportant: It's All or NothingIf you exceed either threshold, all unclassified benefits become subject to FBT—not just the excess.Real Farm ExamplesTax-Free Scenarios:
FBT Required:
Pro tip: Spread larger rewards across quarters to maximize the exemption.Your Action PlanStep 1: Set Up TrackingCreate a simple spreadsheet to track:
Step 2: Plan Reward Timing
Step 3: Know When FBT AppliesIf you exceed the de minimis limits:
Step 4: Keep It Simple
Why This Matters for Your FarmConsistency: All staff rewards follow the same rules—no more guessing which system to use.Simplicity: No payroll complications, grossing up, or PAYE calculations for gift cards.Flexibility: Continue rewarding your team in practical ways that work for farming operations.Cash Flow: Keep rewards under the de minimis limits to avoid FBT liability entirely.Common Questions AnsweredQ: What if I already processed gift cards through PAYE? A: The retrospective law change means FBT treatment is correct. Consider adjusting future payroll processes to reflect FBT treatment instead.Q: Do Farm Source Dollars count toward the $300 limit?
A: Yes, all unclassified benefits count together toward the quarterly and annual thresholds.Q: Can I give some staff gift cards and others cash bonuses? A: Absolutely. Cash bonuses remain PAYE income, while gift cards and vouchers are FBT benefits. The Bottom LineThe new rules bring welcome simplicity to dairy farm operations. Gift cards, Farm Source Dollars, and store vouchers are all FBT benefits. Use the de minimis exemption strategically to keep smaller rewards tax-free, and include larger rewards in your FBT returns when needed.Next steps: Review your current staff reward practices and ensure your tracking system captures all benefits. When in doubt, consult with your accountant to optimize your approach under the new rules. Need help implementing these changes on your farm? Contact CMK Accountants for personalized FBT planning and compliance support.
